US stock futures higher as Israel-Iran conflict spikes oil prices
Oil prices extended gains after Israel temporarily knocked out a natural gas processing facility and targeted fuel storage tanks during strikes over the weekend as part of its campaign against Tehran's nuclear program. Oil jumped by the most in three years late last week when Israel first attacked Iran and Iran fired back.
Iran is considering shutting down the Strait of Hormuz, a senior commander said, but analysts were skeptical this would happen.
"The closure of Hormuz is a low-risk event as Iran would be damaging its own position, both economically and politically, by irritating its main customer," said Natasha Kaneva, head of global commodities research at JP Morgan, in a note late last week...The main players in the Middle East have strong incentives to keep the conflict contained given the economic transformation currently planned and implemented in the Gulf region requires a sustained absence of conflict."
Separtely, President Donald Trump warned Iran not to touch U.S. targets or else it could face the "full strength and might" of the American military.
Oil prices, inflation and the Fed
If the Israel-Iran conflict causes oil prices to continue surging, inflation will jump and consumers will pay the price. The price of oil makes up about half the price of a gallon of gas, so one of the first things to be affected by rising oil prices would be prices at the pump.
But oil also affects the cost of producing things and transporting them to your local store, so even consumers who don't drive or use public transportation will eventually feel the squeeze of more expensive oil one way or another.
The threat of inflation will likely keep the Federal Reserve on hold, economists said. Almost no one forecasts a rate cut when the Fed wraps up its two-day policy meeting mid-week, according to the CME Fed Watch tool that tracks the odds the market puts on a rate move at each Fed meeting.
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
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